Pensions Time Bomb: Only half (56%) expect to be mortgage free when they retire

8 in 10 of those without a pension are not confident of having sufficient income when they retire

The annual pension research conducted by Friends First reveals that almost half of people do not have a pension and of those who do not, 8 in 10 are not confident of having sufficient income when they retire.

Mortgage free…or not?

The research also revealed that only a little over half (56%) expect to be mortgage free when they retire, with 9% saying they would be mortgage free about five years after they retire. 13% reported that they currently rent and would continue to do so and the remaining 17% responded that they didn’t know.

Simon Hoffman, Pensions & Investments Director, Friends First, commented: “Looking back, I think there has always been a realistic ambition, for most people, to be mortgage free when they retire. We assumed that if we worked hard, we would have a retirement free from the shackles of a mortgage or other financial concerns. However the stark reality is that almost half will have to continue to pay a mortgage when they retire and they need to act now to ensure they can continue to make those payments. In order to do so people need take more control, to understand their financial commitments post retirement, and to start funding it now”.

Who has a pension?

44% of adults personally hold a private pension, rising to 53% who have either a pension themselves or have a spouse with one. However almost half (47%) do not have any personal provision for their retirement.
Of those who do not have a pension only 4 in ten people see getting a pension as a priority and while this is growing, 1 in 6 still rule it out. Of those without a pension, almost 8 in 10 (78%) are not confident of having sufficient income when they retire and only 3 in 10 believe they could comfortably live on the current State Pension.

State Pension

The State Pension is €238.30* per week. In response to the question “how much do you think the State Pension is,” just over a quarter of all adults said they didn’t know how much it was. This rises to about a third amongst those without a pension. Among the balance, the average response was €260. When it is explained that the current weekly pension is approximately €230, only 3 in 10 believe they could comfortably live on it. Close to half of those interviewed said they would find it uncomfortable to live on the State Pension alone, with those living in Dublin being particularly vulnerable in this area.
Almost half (46%) without a private pension expect to rely on the State Pension. This level has increased by 15% since 2014.

How do people with a pension plan to spend lump sum…and how did people actually spend lump sum?

The survey asked respondents about their thoughts on what they would do with their lump sum when they retired. For those who have yet to retire, and who have a pension, 73% say they will draw down their lump sum with 43% of these think that they would spend it on a holiday/travel, 18% said they would carry out home improvements and the same amount 18% said they will buy or upgrade their car.
However, interestingly, for those who have retired and drawn down their lump sum the figures are flipped with 36% carrying out home improvements and 21% going on holiday/travel.

“The term ‘pensions time bomb’ has been around for quite some time, but it has never been more relevant and appropriate to use than now. There has been very little movement in terms of pension ownership over the past number of years, despite many organisations advocating for it. In fact this research, which we have undertaken at Friends First for the past ten years, shows very little change in penetration levels and so it seems that people are just not prioritising it. I would encourage people to take action to secure their financial future,” concluded Mr Hoffman.

*Note: when we refer to the State Pension we refer to the standard personal rate of €238.30, as it is quoted as industry norm.

About the research: The research was conducted by Behaviour & Attitudes amongst a nationally representative sample of adults aged 25-55. Quotas were set on gender, age, social class and region to ensure the results correctly reflect the known demographics of the internet population aged 25-55.